Seoul's default risk at 17-month low amid easing tensions with North

By

Jennie Oh

An employee of KEB-Hana Bank in Seoul inspects piles of 100 USD dollar notes in Seoul, South Korea on 06 March 2018. Photo by Yonhap.

SEOUL, March 14 (UPI) -- South Korea's credit default risk has dropped to a 17-month low, as the country's tensions with North Korea have greatly subsided after the Pyeongchang Winter Olympics and an agreement last week to hold an inter-Korean summit.

According to industry trackers on Wednesday, the premium on the credit default swap (CDS) for the country's five-year foreign exchange stabilization bonds closed Monday at 41.68 basis points, down nearly 6 percent from the previous session.

The default risk figure marks the lowest level since Oct. 26, 2016. The bigger the sovereign risk of a country, the higher the premium.

Finance Minister Kim Dong-yeon on Tuesday noted that the CDS has been falling significantly, Yonhap reported.

He said the signs of improving relations between the two Koreas as well as between the North and the United States is likely to have a positive impact on the local financial market and the economy.

"We will use this opportunity to raise [South Korea's] credibility through international credit rating agencies and as a substantive ground for international cooperation," he said.

After special envoys to North Korea announced last week that the North's leader Kim Jong-un suggested an inter-Korean summit in late April, South Korea's credit default risk dropped nearly 20 percent, the Maeil Business Daily reported.